Vodafone revenue rises 16% on acquisitions, forex

Emerging markets drive growth; demand for 3G cards strong

By

AudeLagorce

LONDON (MarketWatch) -- Vodafone Group Plc, the world's largest mobile operator, on Thursday said third-quarter sales rose 16%, boosted by recent acquisitions in India and Turkey and the strength of the euro against the pound.

Revenue for the three months to Dec. 31 improved to 9.2 billion pounds ($18.3 billion) from 7.9 billion pounds a year earlier, topping consensus expectations for revenue of 8.9 billion pounds. Exchange rate movements contributed 4.8 percentage points of the revenue growth, the company said.

Chief Financial Officer Andy Halford noted that 60% of Vodafone's sales were generated in countries using the euro.

Organic service revenue growth of 4.4% also beat analysts' expectations for a rise of 3.5% to 4%.

Despite the better-than-expected results, Vodafone didn't raise its guidance for the year. It still expects sales in the range of 34.5 billion pounds to 35.1 billion pounds and adjusted operating profit of 9.5 billion pounds to 9.9 billion pounds.

Still, Halford mentioned that exchange-rate movements may benefit the full year, given the recent decline of the pound.

Shares in Vodafone (VOD)
VOD, -1.11%
fell 1.4% in London afternoon trading as investors digested the absence of an upgrade to the outlook. See London Markets.

Goldman Sachs analysts said the results were reassuring, though unlikely to require material changes to its forecasts.

Bear Stearns analysts said the results should comfort those concerned about wider macroeconomic trends.

No sign of economic slowdown

Chief Executive Arun Sarin said he has seen no tangible sign of an economic slowdown across the company's businesses and reiterated his belief that it is resilient to any recession.

He added that Vodafone, which is seeking to offset weak growth in its core European markets with greater exposure to fast-growing emerging markets, remains interested in "certain assets" in Asia and Africa. But he declined to go into further detail.

The operator added 10.8 million customers in the quarter, bringing its total subscriber base to 252.3 million. For the first time, the number of customers in emerging markets, including Eastern Europe, the Middle East, Africa and Asia-Pacific, exceeded those in the more mature markets of Western Europe.

European operation saw revenue grow 2.2%, aided by a jump in data sales. Revenue climbed 56% in India, 26% in Turkey and 13.8% in the region grouping Eastern Europe, the Middle East, Africa and Asia-Pacific.

Vodafone Essar, the group's Indian business, had nearly 40 million customers at the end of December. In May, Sarin completed Vodafone's $13 billion purchase of a majority stake in Hutchison Essar Ltd., which is now India's third-biggest wireless operator.

Organic voice revenue growth of just 0.7% reflects the impact of continued price declines, changes in roaming regulation and the cancellation of top-up fees in Italy, Vodafone said.

Organic data revenue growth, however, jumped 41.5%, driven by the increased adoption of 3G cards that allow customers to roam the Internet through the cellular network.

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